- Global equity markets posted gains in the fourth quarter as good news about COVID-19 vaccines outweighed concerns about sharply rising infection rates and tightening social restrictions.
- In most global regions, equity market leadership shifted as value stocks outperformed growth stocks.
- Sectors that had been severely affected by the pandemic, including energy and financials, were among the quarter’s top performers.
- The European Union’s approval of a budget package, recovery fund and Brexit trade deal with the UK boosted European equities. UK equities also benefited from the Brexit trade deal.
Positioning and outlook
- We added several new holdings during the quarter: Norway-based energy company TGS NOPEC Geophysical (OSL:TGS), UK-based online gaming company Gamesys (LSE:GYS), Netherlands-based global brewer Heineken (XAMS:HEIA), Italy-based gym equipment manufacturer Technogym (MIL:TGYM), UK-based shipping services company Clarkson (LSE:CKN), Ireland-based building materials company CRH (NYSE:CRH) and UK-based rental equipment company Ashtead (LSE:AHT) (1.37%, 1.06%, 1.08%, 0.86%, 0.81%, 0.50% and 0.47% of total net assets, respectively). We exited three positions: Germany-based companies Allianz (XTER:ALV) and SAP (NYSE:SAP) and UK-based RELX (RELX) (all 0.00% of total net assets).
- Regardless of the macroeconomic environment, we remain focused on applying our well-established, long-term, bottom-up EQV investment process that seeks to identify attractively valued, high-quality growth companies.
Contributors to performance
- Fund holdings in the consumer staples sector outperformed those of the benchmark, adding to relative return. An underweight in the sector was also beneficial. Multinational tobacco company Philip Morris International (PM) and Danish brewer Carlsberg (OCSE:CARL B) were key contributors during the quarter (2.11% and 1.38% of total net assets, respectively).
- A meaningful overweight in financials, combined with stock selection, added to relative performance.
- Stock selection in communication services contributed to relative results. France-based Criteo (CRTO) (0.86% of total net assets), an ecommerce marketing technology company, was a notable contributor within the sector.
- Geographically, stock selection in Switzerland, combined with an underweight, was the largest contributor to relative results. Exposure in Russia and Turkey also positively affected relative return.
- Russia-based financials company Sberbank (MIC:SBERP) was the largest individual contributor. The stock benefited from the company’s strong nine-months earnings result, paired with management’s increase in 2020 earnings guidance.
Detractors from performance
- The fund’s holdings in the consumer discretionary sector outperformed those of the benchmark sector. However, an underweight in the sector, one of the quarter’s best-performing sectors, hampered relative return.
- Stock selection in the industrials sector detracted from relative return. Within the sector, UK-based companies DCC (LSE:DCC) and HomeServe (LSE:HSV) underperformed during the quarter. Lack of exposure to better-performing index stocks, including Airbus, Vestas Wind Systems and Safran, also detracted from relative results.
- Security selection and an underweight in information technology detracted from relative performance.
- Geographically, stock selection in France, the Netherlands and Germany, as well as underweights in France and Germany, were among the largest detractors from relative return.
- Given the rising equity market, the fund’s cash position dampened relative results. As a reminder, cash is a by-product of our bottom-up stock selection process.
- Germany-based software company SAP was the fund’s largest individual detractor during the quarter. We exited the position due to deteriorating Earnings-Quality-Valuation (EQV) characteristics.
Before investing, investors should carefully read the prospectus and/or summary prospectus and carefully consider the investment objectives, risks, charges and expenses. For this and more complete information about the fund(s), investors should ask their advisors for a prospectus/summary prospectus or visit invesco.com/fundprospectus.
This does not constitute a recommendation of any investment strategy or product for a particular investor.
Investors should consult a financial professional before making any investment decisions.
About the author:
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg
Please leave your comment: